NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Wednesday, May 13, 2015

Remittances to Latin America and the Caribbean set a new record high last year, at a total of $65.4 billion, the Inter-American Development Bank revealed Tuesday.

Cuba, in particular, is in the spotlight as new U.S. policies permit an influx of remittances and as U.S. investment in the Caribbean island nation begins to take root. Development actors are watching to see how these capital flows will affect the Cuban economy — and how they might leverage them to maximize development impact.

Donor agencies have a role to play in making sure remittances reach more people at lower costs, according to Dan Runde, director of the project on prosperity and development at theCenter for Strategic and International Studies.

Technology, innovations in finance, increases in market competition and changes in financial and regulatory environments and payment systems that facilitate remittances are all appropriate uses of official development assistance dollars in this important area, he told Devex.

“In the past 10 years, the development community has woken up to the power and size of remittances, but given their size haven’t gotten the full attention they deserve. We can still be more strategic,” he said.

The U.S. government’s decision to allow more remittances to move from the U.S. to Cuba — a major part of the administration’s recent effort to thaw a long, fraught relationship with a country less than 100 miles from Florida — has sparked debate about whether such cash transfers might actually introduce greater inequality, undercutting pro-poor interventions on the impoverished island nation and around the world.